ICBA Names Top Performing Community Banks

Better Performing Banks Have More Diversified Products and Services

Washington, D.C. (June 4, 2007)—The Independent Community Bankers of America (ICBA) and ICBA Independent Banker magazine named the top earning community banks for 2006. The annual performance ranking examines ICBA member banks based on asset size and ownership type - C Corporation and S Corporation - using FDIC call reports. The rankings evaluate banks based on return on equity (ROE) and return on assets (ROA).

"Community banks play an integral role in ensuring that America's local economies and communities thrive," said Karen Tyson, ICBA senior vice president and director of communications. "This annual list of top 20 community banks is one way ICBA highlights the accomplishments of some of its member institutions in effectively delivering the financial products and services their customers depend on. It's especially impressive to see community banks managing successfully and staying competitive in today's challenging marketplace."

Net interest margins have been a challenge at many of the smallest community banks, continuing a steady decline since 2003 to finish the year at 3.18 percent at institutions with fewer than $100 million in assets. Industry-wide margins remained steadier over the course of the year, finishing at 4.19 percent.

According to FDIC numbers, industry-wide ROA matched the past two year's return of 1.28 percent, while ROE continued its decline from the highs of 2003. Average ROE was 12.34 percent, down from 12.45 in 2005. Institutions with fewer than $100 million in assets saw significant declines, with ROA declining to 0.93 percent from 1.0 last year, and ROE dropping to 7.1 percent from 8.0. Those between $100 million and $1 billion in assets reported an ROA of 1.17 percent and an ROE of 11.32 percent, compared with 1.24 percent and 12.09 percent, respectively.

Even as many community banks saw ROE and ROA slide a little in 2006, others managed to exceed the previous year's gains. In naming the top ICBA performers, ICBA Independent Banker explored the variety of approaches community banks use to achieve results including focusing on niche products, customer service and reaching into underserved market areas. With an eye on results, often these banks sought out new markets, focused on a core niche, or created a rewards-based environment that boosted employee performance.

"If you look at top performing community banks, they are often more diversified in their products and service lines," said Paul Merski, ICBA chief economist and director of tax policy. "It's about tailoring your community bank's products to the needs of the local market."